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Home > Reports > 2021 Annual Report to Congress > Full Report

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Full Report

The Annual Report to Congress creates a dialogue at the highest levels of government to address taxpayers’ problems, protect taxpayers’ rights, and ease taxpayers’ burden.

Report Contents

Executive Summary & Full Downloads

2021 Annual Report to Congress

Prologue

  1. Introductory Remarks by the National Taxpayer Advocate
  2. Taxpayer Rights and Service Assessment: IRS Performance Measures and Data Relating to Taxpayer Rights and Service
  3. Most Serious Problems At-a-Glance
  4. Highlights of TAS Successes Throughout the Past Year
  5. Data Compilation and Validation

The Most Serious Problems Encountered by Taxpayers

Introduction

  1. PROCESSING AND REFUND DELAYS: Excessive Processing and Refund Delays Harm Taxpayers
  2. IRS RECRUITMENT, HIRING, AND TRAINING: The Lack of Sufficient and Highly Trained Employees Impedes Effective Tax Administration
  3. TELEPHONE AND IN-PERSON SERVICE: Taxpayers Face Significant Challenges Reaching IRS Representatives Due to Longstanding Deficiencies and Pandemic Complications
  4. TRANSPARENCY AND CLARITY: The IRS Lacks Proactive Transparency and Fails To Provide Timely, Accurate, and Clear Information
  5. FILING SEASON DELAYS: Millions of Taxpayers Experienced Difficulties and Challenges in the 2021 Filing Season
  6. ONLINE ACCOUNTS: IRS Online Accounts Do Not Have Sufficient Functionality and Integration With Existing Tools to Meet the Needs of Taxpayers and Practitioners
  7. DIGITAL COMMUNICATIONS: Digital Communication Tools Are Too Limited, Making Communication With the IRS Unnecessarily Difficult
  8. E-FILING BARRIERS: Electronic Filing Barriers Increase Taxpayer Burden, Cause Processing Delays, and Waste IRS Resources
  9. CORRESPONDENCE AUDITS: Low-Income Taxpayers Encounter Communication Barriers That Hinder Audit Resolution, Leading to Increased Burdens and Downstream Consequences for Taxpayers, the IRS, TAS, and the Tax Court
  10. COLLECTION: IRS Collection Policies and Procedures Negatively Impact Low-Income Taxpayers

Most Litigated Issues

TAS Case Advocacy
TAS Case Advocacy
TAS Uses Taxpayer Advocate Directives to Advocate for Change

Appendices
Appendix 1: Top 25 Case Advocacy Issues in Fiscal Year 2021 by TAMIS Receipts
Appendix 2: Taxpayer Advocate Service Directory
Appendix 3: TAS Performance Measures and Indicators
Appendix 4: Glossary of Acronyms

National Taxpayer Advocate 2022 Purple Book: Compilation of Legislative Recommendations to Strengthen Taxpayer Rights and Improve Tax Administration

National Taxpayer Advocate 2022 Purple Book: Compilation of Legislative Recommendations to Strengthen Taxpayer Rights and Improve Tax Administration

INTRODUCTION

STRENGTHEN TAXPAYER RIGHTS AND TAXPAYER SERVICE

  1. Elevate the Importance of the Taxpayer Bill of Rights by Redesignating It as Section 1 of the Internal Revenue Code
  2. Revamp the IRS Budget Structure and Provide Sufficient Funding to Improve the Taxpayer Experience and Modernize the IRS’s Information Technology Systems

IMPROVE THE FILING PROCESS

  1. Treat Electronically Submitted Tax Payments and Documents as Timely If Submitted Before the Applicable Deadline
  2. Authorize the IRS to Establish Minimum Competency Standards for Federal Tax Return Preparers
  3. Require the IRS to Work With Tax Software Companies to Incorporate Scanning Technology for Individual Income Tax Returns Filed on Paperor Individual Income Tax Returns Prepared Electronically But Filed on Paper
  4. Extend the Time for Small Businesses to Make Subchapter S Elections
  5. Adjust Individual Estimated Tax Payment Deadlines to Occur Quarterly
  6. Harmonize Reporting Requirements for Taxpayers Subject to Both the Report of Foreign Bank and Financial Accounts and the Foreign Account Tax Compliance Act by Eliminating Duplication and Excluding Accounts Maintained by U.S. Persons in the Countries Where They Are Bona Fide Residents
  7. Adjust the Filing Threshold for Taxpayers Filing as Married Filing Separately and Nonresident Alien Individuals
  8. Amend the Lookback Period for Allowing Tax Credits or Refunds Under IRC § 6511(b)(2)(A) to Include the Period of Any Postponement of Time for Filing a Return Under IRC § 7508A

IMPROVE ASSESSMENT AND COLLECTION PROCEDURES

  1. Require That Math Error Notices Describe the Reason(s) for the Adjustment with Specificity, Inform Taxpayers They May Request Abatement Within 60 Days, and Be Mailed by Certified Mail
  2. Continue to Limit the IRS’s Use of “Math Error Authority” to Clear-Cut Categories Specified by Statute
  3. Require Independent Managerial Review and Written Approval Before the IRS May Assert Multiyear Bans Barring Taxpayers From Receiving Certain Tax Credits and Clarify That the Tax Court Has Jurisdiction to Review the Assertion of Multiyear Bans
  4. Allow Additional Time for Taxpayers to Request Abatement of a Math Error Assessment Equal to the Additional Time Allowed to Respond to a Notice of Deficiency When the Math Error Notice Is Addressed to a Person Outside the United States
  5. Amend IRC § 6212 to Provide That the Assessment of Foreign Information Reporting Penalties Under IRC § 6038, 6038A, 6038B, 6038C, and 6038D Is Subject to Deficiency Procedures
  6. Amend IRC § 6330 to Provide That “An Opportunity to Dispute” an Underlying Liability Means an Opportunity to Dispute Such Liability in a Prepayment Judicial Forum
  7. Amend IRC § 6402(a) to Prohibit Offset of the Earned Income Tax Credit (EITC) Portion of a Tax Refund
  8. Require the IRS to Waive User Fees for Taxpayers Who Enter Into Low-Cost Installment Agreements or Who Have an Adjusted Gross Income Equal to or Less Than 250 Percent of the Federal Poverty Level
  9. Improve Offer in Compromise Program Accessibility by Repealing the Partial Payment Requirement and Restructuring the User Fee
  10. Modify the Requirement That the Office of Chief Counsel Review Certain Offers in Compromise
  11. Amend IRC § 7122 to Require the IRS to Refund Any Payment Collected Pursuant to a Federal Tax Lien That Exceeds the Amount of an Accepted Offer in Compromise
  12. Require the IRS to Mail Notices at Least Quarterly to Taxpayers With Delinquent Tax Liabilities
  13. Clarify When the Two-Year Period for Requesting Return of Levy Proceeds Begins
  14. Protect Retirement Funds From IRS Levies, Including So-Called “Voluntary” Levies, in the Absence Of “Flagrant Conduct” by a Taxpayer
  15. Provide Taxpayer Protections Before the IRS Recommends the Filing of a Lien Foreclosure Suit on a Principal Residence
  16. Provide Collection Due Process Rights to Third Parties Holding Legal Title to Property Subject to IRS Collection Actions
  17. Extend the Time Limit for Taxpayers to Sue for Damages for Improper Collection Actions
  18. Direct the IRS to Implement an Automated Formula to Identify Taxpayers at Risk of Economic Hardship
  19. Revise the Private Debt Collection Rules to Eliminate the Taxpayers Intended to Be Excluded by the Taxpayer First Act

REFORM PENALTY AND INTEREST PROVISIONS

  1. Convert the Estimated Tax Penalty Into an Interest Provision to Properly Reflect Its Substance
  2. Apply One Interest Rate Per Estimated Tax Underpayment Period
  3. Pay Interest to Taxpayers on Excess Payments of Estimated Tax to the Same Extent Taxpayers Must Pay a Penalty on Underpayments of Estimated Tax
  4. Reduce the Federal Tax Deposit Penalty Imposed on Taxpayers Who Make Timely Tax Deposits
  5. Extend Reasonable Cause Defense for the Failure-to-File Penalty to Taxpayers Who Rely on Return Preparers to E-File Their Returns
  6. Authorize a Penalty for Tax Return Preparers Who Engage in Fraud or Misconduct by Altering a Taxpayer’s Tax Return
  7. Clarify That Supervisory Approval Is Required Under IRC § 6751(b) Before Proposing Penalties
  8. Require an Employee to Determine and a Supervisor to Approve All Negligence Penalties Under IRC § 6662(b)(1)
  9. Modify the Definition of “Willful” for Purposes of Finding Report of Foreign Bank and Financial Accounts Violations and Reduce the Maximum Penalty Amounts

STRENGTHEN TAXPAYER RIGHTS BEFORE THE OFFICE OF APPEALS

  1. Require Taxpayers’ Consent Before Allowing IRS Counsel or Compliance Personnel to Participate in Appeals Conferences

STRENGTHEN THE OFFICE OF THE TAXPAYER ADVOCATE

  1. Clarify That the National Taxpayer Advocate May Hire Legal Counsel to Enable Her to Advocate More Effectively For Taxpayers
  2. Clarify the Authority of the National Taxpayer Advocate to Make Personnel Decisions to Protect the Independence of the Office of the Taxpayer Advocate
  3. Clarify the Taxpayer Advocate Service’s Access to Files, Meetings, and Other Information
  4. Authorize the National Taxpayer Advocate to File Amicus Briefs
  5. Require the IRS to Address the National Taxpayer Advocate’s Comments in Final Rules
  6. Authorize the Office of the Taxpayer Advocate to Assist Certain Taxpayers During a Lapse in Appropriations
  7. Repeal Statute Suspension Under IRC § 7811(d) for Taxpayers Seeking Assistance From the Taxpayer Advocate Service

STRENGTHEN TAXPAYER RIGHTS IN JUDICIAL PROCEEDINGS

  1. Expand the Tax Court’s Jurisdiction to Hear Refund Cases and Assessable Penalties
  2. Repeal Flora: Give Taxpayers Who Cannot Pay the Same Access to Judicial Review as Those Who Can
  3. Authorize the Tax Court to Order Refunds or Credits in Collection Due Process Proceedings Where Liability Is at Issue
  4. Provide That the Time Limits for Bringing Tax Litigation Are Subject to the Judicial Doctrines of Forfeiture, Waiver, Estoppel, and Equitable Tolling
  5. Amend IRC § 7456(a) to Authorize the Tax Court to Sign Subpoenas for the Production of Records Held by a Third Party Prior to a Scheduled Hearing
  6. Provide That the Scope of Judicial Review of Determinations Under IRC § 6015 Is De Novo
  7. Clarify That Taxpayers May Raise Innocent Spouse Relief as a Defense in Collection Proceedings and Bankruptcy Cases
  8. Clarify That Taxpayers May Seek Innocent Spouse Relief in Refund Suits
  9. Fix the Donut Hole in the Tax Court’s Jurisdiction to Determine Overpayments by Non-Filers With Filing Extensions

MISCELLANEOUS RECOMMENDATIONS

  1. Restructure the Earned Income Tax Credit (EITC) to Make It Simpler for Taxpayers and Reduce Improper Payments
  2. Allow Taxpayers the Option of Using Prior Year Income to Claim the Earned Income Tax Credit (EITC) During Federally Declared Disasters
  3. Exclude Taxpayers in Specified Circumstances From the Requirement to Provide a Social Security Number for Their Children to Claim the Child Tax Credit
  4. Clarify Whether Dependents Are Required to Have Taxpayer Identification Numbers for Purposes of the Credit for Other Dependents
  5. Allow Members of Certain Religious Sects That Do Not Participate in Social Security and Medicare to Obtain Employment Tax Refunds
  6. Amend IRC § 36B(d)(2) to Prevent Individuals From Losing Some or All of Their Premium Tax Credits When Receiving Lump-Sum Social Security Benefits Attributable to a Prior Year
  7. Amend the Combat-Injured Veterans Tax Fairness Act of 2016 to Allow Veterans of the Coast Guard to Exclude Disability Severance Pay From Gross Income and File Claims for Credit or Refund for Taxes Withheld From Excluded Income
  8. Encourage and Authorize Independent Contractors and Service Recipients to Enter Into Voluntary Withholding Agreements
  9. Require the IRS to Specify the Information Needed in Third-Party Contact Notices
  10. Authorize the Treasury Department to Issue Guidance Specific to IRC § 6713 Regarding the Disclosure or Use of Tax Return Information by Preparers
  11. Expand the Protection of Taxpayer Rights by Strengthening the Low Income Taxpayer Clinic Program
  12. Compensate Taxpayers for “No-Change” National Research Program Audits
  13. Establish the Position of IRS Historian Within the Internal Revenue Service to Record and Publish Its History

Appendix 1: Additional Reference Materials for Legislative Recommendations in This Volume

Appendix 2: Prior National Taxpayer Advocate Legislative Recommendations Enacted Into Law